Understanding how income and resources are deemed is critical in determining eligibility for Needs Based Benefits. This article will focus specifically on how income and resources affect the three types of cash benefit programs: Supplemental Security Income (SSI), Social Security Disability Income (SSDI) and Childhood Disability Benefits (CDB). SSI, SSDI and CDB provide cash income to persons who are disabled and incapable of Substantial Gainful Activity (SGA). In order to better understand eligibility for these programs one must understand how income and available resources affect eligibility for these three programs. SSI deems earned income, unearned income and in-kind income differently. SSDI and CDB only deem earned income and do not reduce benefits based on unearned or in-kind income.
As of 2021, SGA is defined as the ability to earn $1,310 per month. Persons who are blind are allowed to earn SGA in the amount of $2,190 per month. The reason for the difference in the amount earned by persons who are blind and other disabilities is that SGA for persons who are blind was indexed for inflation in 1974 when SSI was first introduced. The SGA level for persons who have other disabilities was not indexed for inflation until January 1, 2020. The SGA amount for other disabilities was increased to $500 per month in 1990 and to $700 in January 2020 when it was also indexed for inflation.
SSI TREATMENT OF INCOME
In order to qualify for SSI a person must have a medically determinable disability which has lasted a year, is expected to last a year or end in death before the end of the year. The person with a disability must have limited resources and must also be incapable of SGA as discussed above.
The following is a list of resources that a person is allowed to own and still be eligible for SSI:
- $2,000 in cash resources (includes, stocks, bonds, bank accounts,etc.)
- $100,000 in an ABLE Account
- 1 motor vehicle
- Furniture and household goods of reasonable value
- Life insurance policies you own with a face value of $1,500
- Burial funds of up to $1,500
- Burial plots or spaces for you or your immediate family
- Property you or your spouse use in a trade or business or in your job if you work
SSI also does not count the following income in determining SSI eligibility:
- The first $20 per month of income received from any source
- The first $65 of most earned income and half of any earned income in excess of $65
- SNAP
- Home Energy Assistance
- Food or shelter from certain non-profit organizations approved by SSI
Once a person has been found eligible for SSI, his eligibility may be reviewed every 1-3 years. Even if SSI later determines that an individual’s disabling condition may not improve over time, his case will be reviewed every 5 years to be certain he continues to meet the SSI eligibility criteria.
Because the Social Security Administration (SSA) wants to encourage persons on SSI to work their way off the program, they deem earned income differently than they do unearned income. Unearned income in excess of $20 per month is deducted dollar for dollar from one’s SSI monthly award. Federal maximum SSI payment level for 2021 is $794. If a SSI recipient receives a $100 birthday check, this cash birthday gift must be reported to SSI within 10 days of the month following receipt of the cash gift. The first $20 is not deemed and the following month’s SSI check will be reduced by $80.
The following is an example of how earned income is treated by SSI. In this example the individual is earning $1,000 per month.
- Work Earnings: $1,000.00
- Deduct unearned income set aside: – 20.00
- Deduct Earned income set aside: – $65.00
- Deduct Impairment Related Work Expenses* if any (e.g. work transportation, job coach, etc.): – $200.00
- Divide remaining Countable income by 2 (countable earning = $715 divided by 2): $357.50
Second Step:
Maximum monthly SSI: $794.00
Subtract Countable Earnings: -$357.50
Adjusted SSI = $436.50
Earned income: $1,000.00
Total Monthly Income = $1,436.50
* Note: You can maximize the amount of money you can earn and still receive SSI if you become familiar with deductions for Impairment Related Work Expenses (IRWEs) which are discussed below.
SSDI TREATMENT OF INCOME
In addition to being disabled, an individual applying for SSDI must have worked and paid into social security the requisite number of quarters, sometimes referred to as Quarters of Coverage (QC’s). The requisite number of quarters is determined by the number of years a person has worked and his age when he was first determined to be disabled. As with SSI, the disability must be a medically determinable mental or physical disability that has lasted a year or is anticipated to last a year which prevents him from earning SGA. If he meets these requirements, he will be eligible for SSDI based on his own work record. The amount of SSDI he receives each month will vary depending on the rate of pay and number of QC’s paid into SSA.
SSDI has different rules regarding the treatment of earned and unearned income than SSI. For example, unearned income does not affect SSDI as it does SSI. There is also no reduction in SSDI benefits earned in excess of the $65 earned income set aside as there is with SSI. If a person earns $1,000 per month, he will be able to keep the entire $1,000 as well as his full SSDI monthly award. As long as the individual is incapable of SGA ($1,310), he will keep his full SSDI plus his earnings. An individual can also earn over SGA but only for a time period referred to as a “Trial Work Period” (TWP). If they continue to earn in excess of SGA after the TWP, he may lose his SSDI. During the TWP, a person can test their ability to maintain employment without fear of losing his SSDI. As long as a the individual’s disabling condition meets SSA Rules, an individual may be able to keep his Medicare for at least 8.5 years after returning to work. The 8.5 years includes the TWP. SSA also offers an additional safety net for individuals who want to try to work called the Extended Period of Eligibility (EPE). During the 36 month EPE, SSA looks at one’s monthly earnings and if one earns less than SGA, he can qualify for SSDI for those months he earns less than SGA.
SSA will deduct the value of Impairment Related Work Expenses (IRWEs) from earned income which may allow an individual to earn over SGA without losing his benefits. IRWEs are any expenses an individual incurs that enables him to work. Examples of IRWEs include:
- Attendant care services
- Transportation costs that are impairment related
- Medical devices
- Prosthesis
- Work related equipment or services such as typing aids, page turning devices, telecommunications devices for the deaf, seeing eye dog, medical supplies such as catheters, elastic stockings, incontinence pads.
CDB TREATMENT OF INCOME
An individual becomes eligible for CDB if he has a parent who has worked and paid into the Social Security system and the parent either becomes disabled, retires or dies. If the parent is retired or disabled, the Disabled Adult Child (DAC) is eligible for 50% of what the parent would receive at Full Retirement Age (FRA). If the parent is deceased the DAC will receive 75% of the deceased parent’s FRA Benefit. To qualify for CDB, . the DAC must be over the age of 18 and his disability must have manifested itself prior to the age of 22. The DAC must also be single and be continuously incapable of SGA prior to the parent dying, retiring or becoming disabled. If a DAC earns over SGA for any 9 months in a 5 year period, he is presumed capable of SGA and may not qualify as a DAC. The burden of proving he is incapable of SGA shifts to the DAC and if he cannot prove he is incapable of SGA, he will not qualify for CEB when his parent dies, retires or becomes disabled. This ineligibility is irrevocable.
While there are a number of similarities among SSDI and CDB, earning SGA for a period of 9 months prior to the parent’s death,, retirement or disability is the one major difference which places a DAC at risk of losing his eligibility for CDB. One needs to be knowledgeable about this distinction if one works and earns over SGA prior to the parent’s death, disability or retirement. If an adult child qualifies for CDB, the earned income rules described above under SSDI will apply. The DAC can attempt to work under a TWP and requalify for CDB if he is later incapable of working.
There are a number of steps one can take to protect CDB if one works prior to the parent’s death , disability or retirement. Notifying SSA of any and all IRWEs may enable a DAC to work and stay under the SGA amount. It is important to note that the IRWEs, in order to reduce the amount of SGA, must be paid by the individual and not by a third party or Special Needs Trust(SNT). If a third party or SNT pays for the IRWE, then the expense will not qualify as a deduction from the SGA level of earnings.
Another way to protect CDB is to notify SSA if one is employed by a ‘benevolent employer’ who may accept a lower level of work performance than would otherwise be accepted. Examples of benevolent employers would be a family friend or relative who hires the individual as a kind deed or favor to the parent or individual. Contemporaneous reporting of a Benevolent Employer may assist in winning an appeal should the individual exceed SGA amounts and lose his SSDI or CDB as a result.
SSA TREATMENT OF IN-KIND SUPPORT AND MAINTENANCE
In-Kind Support and Maintenance (ISM) is only deemed as a type of ‘income’ by the SSI Program. Neither SSDI nor CDB will be reduced as a result of the receipt of ISM. If an individual is receiving assistance in paying for food or shelter expenses, SSI will reduce his SSI maximum payment by 1/3rd the full SSI award minus the first $20. An individual can receive more than 1/3rd of his check in the form of ISM and the maximum amount deducted will still be 1/3rd of the monthly SSI award. This is referred to as the “One Third Reduction of SSI for In-Kind Support”.
One way to avoid the reduction of one’s SSI is for the individual who is living in the home of another to pay his ‘fair share of household expenses”. Fair share is determined by a fraction of one over the number of people living in the home. If an adult child lives with his parents, one needs to add the monthly cost of food, mortgage or rent, homeowners insurance if there is a mortgage, real estate taxes, heating bill, electric bill, water, sewer and garbage pickup and divide the total of these 9 expenses by the number of people living in the home to determine one’s ‘fair share’. If the individual can afford to pay for his fair share from his own SSI and/or earnings, he will receive the full check and avoid the 1/3rd loss of SSI. If he is incapable of paying his fair share, an individual may want to open an ABLE Account. Resources held in an ABLE Account are exempt and payments for food and shelter are allowable as a “Qualified Disability Expense”. If the ABLE Account is used to reimburse the parent or pay directly for rent or other subsidized housing expense, the individual will also be able to avoid the 1/3rd loss of SSI. Contributions to an ABLE Account are limited to $15,000 per year. For more information about avoiding the 1/3rd Reduction of SSI Through the Use of an ABLE Account see Fletchertilton.com/articles to learn more.